Replacing a pay-as-you-go pension system with a fully funded scheme could eliminate the incentives (under the pay-as-you-go system) to informalize production and employment. Simulations of an endogenous-growth model suggest that long-term growth could increase substantially by such a reform....

This paper builds a general test of contagion in financial markets based on bivariate correlation analysis - a test that can be interpreted as an extension of the normal correlation theorem. Contagion is defined as a structural break in the data generating process of rates of return. Using a...

This paper builds on a standard factor model of stock market returns to reconsider recent empirical literature on contagion in financial markets based on bivariate correlation analysis. According to this literature, contagion is defined as a structural break in the linear transmission mechanism...

Most interpretations of the Exchange Rate Mechanism crisis in 1992-93 ignore the key role played by structural policy spillovers among European countries, and overlook the effects of coordination (or lack thereof) of monetary and exchange rate policies among the countries making up the periphery...

The paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an anti-inflationary device, when the Center is hit by an aggregate demand shock. Cooperation in the Periphery...

We study the interaction of fiscal and monetary policies during a currency crisis in an economy with government nominal liabilities. We show that the stock and maturity of these liabilities are key determinants of the magnitude, timing and predictability of a devaluation. Among notable features...

The paper examines the view that the Asian currency and financial crisis in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even though market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more...